Intel Corporation (INTC) saw its stock surge by 6% in early trading on September 17, following the announcement of plans to spin off its foundry business into a separate unit with its own board and the capability to raise outside capital. The shares ended the day up 2.7%.
In addition to the spinoff announcement, Intel revealed it had secured a new grant and formed a deal with a leading Mag 7 technology company. Earlier this year, Intel had already begun separately reporting the financials of its foundry division.
Pat Gelsinger, Intel’s CEO, commented on the decision, “A subsidiary structure will unlock important benefits. It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel.” Despite this change, Intel Foundry’s leadership team will remain intact and continue to report directly to Gelsinger.
MarketWatch columnist Therese Poletti noted that this restructuring is intended to reassure customers about the confidentiality of their chip designs, particularly as Intel’s manufacturing business has struggled to attract a significant client base beyond its largest customer, Microsoft. Some industry observers have raised concerns about sharing intellectual property with a competitor’s manufacturing unit.
Additionally, there are reports that Intel is contemplating turning its foundry business into a new publicly traded entity, according to CNBC sources.
The move to spin off the foundry division follows disappointing second-quarter earnings results. For the quarter ending June 29, Intel reported adjusted earnings of just 2 cents per share, significantly below the 10 cents anticipated by analysts. Revenue for the quarter totaled $12.83 billion, a 1% decline year-over-year, and fell short of the $12.93 billion forecast.
Following the earnings report, Gelsinger acknowledged the company’s struggles, stating, “Our revenues have not grown as expected — and we’ve yet to fully benefit from powerful trends like AI. Our costs are too high, our margins are too low.”
Intel’s stock has dropped approximately 55% year-to-date, prompting the company to initiate a $10 billion cost-saving plan, which includes laying off 15,000 employees, or 15% of its workforce, expected to be completed by the end of the year. Gelsinger referred to this restructuring as the most significant since the company’s decision to enter the memory microprocessor market four decades ago.
On September 16, Intel also announced a new partnership with Amazon Web Services (AWS), under which Intel Foundry will develop an AI fabric chip for AWS using Intel’s 18A technology, the company’s latest innovation since the introduction of FinFETs in 2011.
“We are beginning to see a meaningful uptick in interest from foundry customers,” Gelsinger remarked. “This includes continued momentum in advanced packaging, which remains a significant differentiator for Intel Foundry as we have tripled our deal pipeline since the beginning of the year.”
